Current projects

I. Tax Compliance Behavior

Our main research focus is on individuals’ tax compliance behavior and the interaction between tax authorities and taxpayers. We collaborate with researchers and practitioners from different disciplines on a variety of topics:

 

The effects of audits, outreach, and education on US taxpayers’ payment morale and their attitudes towards the IRS

This project aims to explore several factors that drive tax compliance behavior and comprises three studies. First, we analyze tax return information from self-employed US taxpayers to quantify the impact of tax audits on reporting compliance. Second, we conduct a representative survey study in order to assess taxpayers’ attitudes towards the tax agency. Combining the survey responses with IRS data on taxpayers’ filing behavior will allow us to explore how tax audits affect taxpayer attitudes and how these attitudes, in turn, shape compliance choices. Third, we develop a field experiment that aims to identify the effect of different letters to taxpayers on their reporting compliance. As the number of taxpayers who fail to meet their payment obligations is substantial, this study intents to identify innovative means to promote payment morale.

  • Funding: US Taxpayer Advocate Service
  • External collaborators: Sebastian Beer (IMF), Brian Erard (Brian Erard & Assosciates)

Publications:

https://taxpayeradvocate.irs.gov/Media/Default/Documents/2017-ARC/ARC17_Volume2_05_AuditsIDtp.pdf

https://www.irs.gov/pub/irs-soi/16resconkirchler.pdf

What drives late filing? Developing a typology of delinquent taxpayers

This project intents to develop a typology of late filers, as one important “segment” of non-filers. We use IRS survey data (effort/compliance costs, stress, motives for late filing), tax return data (demographic factors (e.g., Hofmann, Voracek, Bock, & Kirchler, 2017)), and audit information (e.g., Beer, Kasper, Kirchler & Erard, 2015) to get a better understanding of the motivations that underlie late filing. Subsequently, we will explore how late filers differ from individuals who file and pay on time. Finally, we will analyze how well the factors we identified predict filing behavior. Ultimately, a better understanding of the drivers of late filing will facilitate the development of more efficient collection strategies.

  • IRS Joint Statistical Research Program
  • External collaborators: James Alm (Tulane University)

Tax morale among self-employed and their customers: A comparison of attitudes and compliance regarding value added tax versus income tax

Economic psychology and behavioral economics have focused strongly on studying individual behavior concerning income tax, rather disregarding other types of taxation. The project addresses value added tax (VAT) as one of the key imposts in most countries. VAT is a tax on consumption paid on the majority of transactions at a rate of 20% in Austria. Special attention will be paid to self-employed taxpayers, who often perceive paying VAT “out of their pockets” and regard VAT as part of their business turnover, although in fact they just collect the tax from consumers and forward it to the authorities. The planned research consists of three parts: (1) A first study investigating social representations of VAT in comparison to income tax to identify crucial differences with regard to mental concepts, opinions and feelings. Expected results will indicate psychological explanations for VAT evasion, for instance with respect to mental accounting processes, which resemble different strategies to keep control over finances. (2) A cross-sectional survey study concentrating on self-employed business owners and measuring a number of demographic, business-related and psychologically relevant variables will explore which psychological constructs account for prevailing mental accounting practices and indicated reactance to pay VAT. (3) An incentivized laboratory experiment investigating the influence of mental accounting on VAT compliance especially taking into account the interaction of sellers, buyers and tax authorities will be conducted as a final step. Results from all three studies will give much-needed insights regarding important determinants of VAT compliance. Furthermore, these findings will be beneficial for the training of young business owners in order to influence their perception of VAT and thus to decrease VAT evasion.

  • External collaborators: Christoph Kogler (Tilburg University), Luigi Mittone and Viola Saredi (University of Trento)

Publications:

Olsen, J., Kogler, C., Stark, J., & Kirchler, E. (in press). Income tax versus value added tax: A mixed-methods comparison of social representations. Journal of Tax Administration

Cross-cultural evaluation of the Slippery Slope Framework

The main assumptions of the slippery slope framework of tax compliance (Kirchler, 2007) are investigated in more 44 countries worldwide. Four different scenarios manipulating trust in and power of authorities are used, as well as a questionnaire including manipulation checks and measures of intended, voluntary and enforced tax compliance. Besides testing the assumption that both, trust and power, are important determinants of tax compliance, the study aims at identifying general differences between the participating countries. The sample of about 15,000 participants from all continents consists exclusively of students (predominantly economics) aged between 17 and 25 years. The findings confirm the basic assumptions of the slippery slope framework. In all countries, the highest level of tax compliance can be found in conditions of high trust and high power. More voluntary compliance is observable in conditions of high trust, more enforced compliance in conditions of high power. In addition, collected data on perceived similarity of the presented scenarios and the respective country allows a reality-based validation of the slippery slope framework by relating assessments of trust and power to estimations on shadow economy and corruption in the participating countries. Besides high correlations between trust and power and shadow economy and corruption, trust and power are also correlated with national happiness and health.

The role of emotions in tax compliance behavior

While the investigation of emotional processes has gained a tremendous raise of attention in the general decision-making research community during the past ten to fifteen years (Ekman, 2016; Lerner, Li, Valdesolo, & Kassam, 2015; Volz & Hertwig, 2016), only very little is known about the underlying emotional processes that determine the individual tax compliance decisions. The Slippery-Slope Framework (SSF) for instance, demonstrates how certain actions taken by tax authorities lead to different compliance outcomes, however it does not elaborate the underlying psychological processes of the taxpayers. In order to close this research gap, I will build on and extend the existing research by investigating the role that emotions play in tax decision-making.

My dissertation project follows a multimethod approach, using a triangulation of qualitative and quantitative methods. In a first, qualitative study I assessed the subjective perspectives of taxpayers on the process of paying taxes. Building up on these results the emotions present during this process will be systematically explored and the causal relationship between emotional responses and compliance decisions will be investigated in a set of studies.

  • External collaborators: Christoph Kogler, Marcel Zeelenberg (Tilburg University)

II. Household financial decision making

The aim is to describe the decisions taken by partners in the course of everyday life in close relationships. Analysis is undertaken mainly of economic decisions taken jointly by men and women. Thus the focus is on romantic relationships, on money and on other demands in everyday life. In order to understand economic decision-making, account must be taken not only of the relationship between the decision-makers, but also of other background elements to the decision. It is becoming increasingly clear that it is necessary to understand everyday life in the home in its totality before any composite part of it will make sense.

Anyone seeking to study joint decision-making in private households will surely ask themselves key questions which they then seek to answer, such as: which of the partners is mainly responsible for making which decisions? What affects the relative balance of influence between the partners? How do the partners try to influence or convince each other?

Decisions within private households, including financial decisions, do not follow the normative-rational model which acts as a basis for decision-making in economics as a whole. It is only in exceptional instances that both partners take time out from the endless routine activities around the house and consciously reach a joint decision, having weighed up their own wishes, the alternative options and the advantages and disadvantages of each choice. Anyone seeking to offer an adequate description of joint decision-making in close relationships needs to unravel the maze of everyday life patiently and, as far as possible, without pre-judging the issues. This will enable them to identify segments of interactions which could represent fragments of decision-making, slowly putting the pieces together to build up a picture of decision-making.

Credit Use

Credit use is on the rise in Western societies. Strictly speaking, credit use is a form of debt, and can lead to problem debt when debtors are unable to meet the repayment of the credit rates. Research on credit use has previously focused on sociodemographic variables, and on psychological variables such as credit attitudes, impulsiveness or money management.

In this project, we take a process perspective on credit use, studying in particular cognitive aspects.

First, credit use can be seen as a decision about a particular way of financing a product or service. At the time of decision, consumers have to act on their predictions about future utility of the good and future disutility of payment. However, predictions often differ from subsequent experience, as demonstrated by research on affective forecasting and predicted utility. One goal is to study the predictions of prospective credit users and their correspondence to experience of actual credit users.

Second, when credit is taken up for durables, both the experience of product and payment is extended over time and subject to adaptation or sensitization processes. At some point, these developments could result in an unfavourable constellation of pleasure of consumption and pain of payment where consumers feel the need for additional consumption. One goal is to study the developments of utility of product and disutility of payment.

Third, product and payment can be more or less strongly associated in consumers’ minds. Research on mental accounting suggests that the degree of association of costs and benefits plays an important role in consumer decisions and experiences. One goal is to study how credit users associate a loan with the corresponding benefits and how different association structures influence consumers’ perceptions and behaviours.

Fourth, cognitive aspects have not only been neglected in research on credit use but also in research on over-indebtedness. Here again mental accounting might play a role. One goal is to study how actual money management practices correspond with mental accounting structures of over indebted people.

Fifth, existing credit models often operate with constant repayment rates. Research has shown that people often prefer improving sequences, which would suggest that repayment rates should decrease over time. One goal is to study whether this idea is suitable for a credit context and to explore different arguments.


III. Hindsight bias

The hind sight bias is a phenomenon we all encounter frequently in our everyday lives. It describes a common distortion in our memory that takes place when we try to remember our predictions after an event has already happened. When the outcome and the circumstances become clear, it oftentimes seems to us as if this outcome was inevitable and we are quite convinced that we have known this all along. Some studies demonstrate this phenomenon quite remarkably. Fischhoff (1975) confronted participants of a study with information about a rather unknown war that took place between the British and a tribe called Gurkhas in Nepal in the 18th


IV. Gender stereotypes, new manifestations of sexism, and leadership

 “Gender stereotypes are alive, well, and busy producing workplace discrimination” – Madeline Heilman & Alice Eagly, 2008

Despite many advances women have made, they continue to be disadvantaged in many social areas such as in leadership, science, and technology. The unabated discrimination against women is largely based on gender-stereotypes and sexism, which has taken more subtle forms as openly hostile attitudes towards women have become less acceptable over time.

In order to understand the continued discrimination against women, this research examines the development of gender-stereotypes and changing manifestations of sexism in the context of the 21st century. It addresses the question how the advancement of women and changes in gender relations might change gender-stereotypes, but might also shape new forms of sexism and gender-based discrimination.

One line of research focused on the longitudinal study of obituaries about female and male leaders started by Kirchler (1992). In the study of obituaries, it has been demonstrated that the description of female leaders, how they were perceived to be, has changed and that over time female leaders are increasingly being described as more similarly to male leaders. We are currently using these obituaries to further explore, whether prescriptive gender-stereotypes about female leaders, how they were required to be, have also changed over time.

Another line of research focuses on the identification, description, and measurement of new manifestations of sexism. Particularly, we are interested in how sexism is expressed in the 21st century, and what the potential downstream consequences of these new manifestations of sexism are regarding the discrimination of women, and the support for gender-equality policies.

  • External collaborators: Francesca Manzi, Madeline Heilman, Patrick Shrout (New York University), Christa Nater (Bern University)